Penalties in the Safety Net: Effects of Work Requirement Enforcement on Program Participation and Labor Supply

• In Event: Administrative Burden in the Safety Net: Spillovers and Solutions

Abstract

U.S. cash assistance promotes self-sufficiency through employment but imposes penalties that reduce or remove benefit income when participants violate work requirements. This paper quantifies the downstream consequences of not meeting work requirements using novel administrative data covering the full caseload of Michigan's Temporary Assistance for Needy Families (TANF) program, combined with monthly enrollment records in the Supplemental Nutrition Assistance Program (SNAP) and Medicaid, as well as quarterly Unemployment Insurance earnings records. We study a policy reform that increased the length of time that families were removed from TANF after violating work requirements to estimate causal responses of long-term safety net attachment and labor supply. We find that penalties result in persistent enrollment declines in SNAP and Medicaid for all household members, even those still eligible for programs. Moreover, when penalties are made more severe, far fewer families re-attach to TANF and formal employment declines due to a decreasing rate of job entry. On net, labor supply responses do not offset lost benefit income, and harsher penalties reduce cumulative financial resources by an additional 84 percent over the subsequent two years. Our findings indicate that sanctions reduce broader safety net attachment and increase economic instability for vulnerable families over the long-term.
 

Author

• Katherine Richard, Georgetown University
  Presenting Author